Was it the weather, or not?
Whether or not this brutal winter has been causing the economy to slow down will become a little clearer Friday. That’s when the Labor Department will report the employment data for February.
The past two months have had disappointing job growth. There were only 74,000 new jobs created in December, a sub-basement figure that surprised everyone (including me).
All the so-called experts were predicting that employment would pick up in January, but as I’ve explained in this space, that month almost never has good job growth because of questionable statistical moves employed by government number-crunchers.
But then January’s increase of only 113,000 jobs caused a greater than usual hand-wringing among economists, which sets the table for Friday’s important data dump.
Meanwhile, over at the Federal Reserve, the hand-wringing corner of the capital, the problems are mounting as it desperately tries to exorcise itself of quantitative easing before the monetary monster rages out of control.
But with more and more economic (and international) news turning ugly, the Fed is trapped. If it further reduces its purchases of bonds and mortgages with funny money being printed through QE, it could slow economic growth.
And if it chooses not to kill QE, then US government bonds could become a less valuable investment to foreigners, which will surely cause interest rates to rise beyond what the Fed and Washington’s budget deficit can tolerate.
Here’s why: If lending money to Washington becomes less attractive, then the US will have to offer higher interest rates to get buyers. It’s as simple as that.
Last Friday we got the latest bad news: The economy really didn’t grow at a 3.2 percent annual rate in the fourth quarter of 2013 as previously reported. The real growth was a much more modest 2.4 percent.
This revision is problematic for the blame-the-storms crowd.
Both of those GDP figures are down substantially from the 4.1 percent annualized growth rate in the third quarter, which climbed to that mark only because companies were amassing inventories, a buildup that was partly responsible for the downward revision in the final quarter.
All these figures are substandard for an economy that is being force-fed liquidity through QE, as well as the beneficiary of incredibly low interest rates for an extended period of time and massive amounts of government spending.
Fed chief Janet Yellen was gently grilled by Congress last week about the economy’s disappointing performance since the recession ended five years ago. Congress wanted to know if Yellen would continue to scale back QE if the economy worsens.
She said the Fed would be flexible.
There will be a whole lot more pressure on the Fed to call off its QE tapering if Friday’s employment report is bad. My prediction for this report? I don’t have one.
But I will say that Friday’s number will give us the clearest picture in months of what the economy is really doing because despite the jobs impact of the February storms, the number-crunchers will produce less of a snow job in this report.
As I’ve mentioned before, the January employment figures are hurt by adjustments that the Labor Department makes for small companies it thinks are quietly going out of business during the month.
This statistical model will jack up job growth in the spring, when the Labor Department assumes but can’t prove that a lot of companies are coming into existence and creating jobs.
That leaves February, a month during which the government doesn’t have its thumb too heavily on the jobs scale. In the past three Februarys, it has added not-seasonally adjusted guesses of only 102,000, 91,000 and 112,000, respectively, to its legitimate count.
Experts are expecting growth of 165,000 jobs. In my opinion, they could be right or they could be wrong. I should be a politician with that sort of evasion.
The Commerce Department either accidentally or intentionally botched an investigation in 2010 into a guy who was fabricating unemployment data. And now it is acting very suspiciously about that probe.
I’ve written about Julius Buckmon before. He was a Census Department data collector who was caught filing false surveys for the Labor Department’s unemployment-rate establishing Household Survey.
As I have also written before, all things surrounding the Buckmon incident are now being investigated by the House Oversight Committee, the Joint Economic Committee of Congress, the Commerce Department’s Office of Inspector General and, it seems, the US Attorney’s Office in Philadelphia.
And by me.
Was Buckmon a renegade? I’m told he wasn’t. Not only were his actions condoned by higher-ups but, I’ve been told, also encouraged by them. Those bigger shots are now being investigated too.
And, by the way, I think I know why Commerce is being so difficult on this report. It’s pretty interesting, but the full story will have to wait for a later column. As they say in the drama biz, To Be Continued ….